Fuel discount war to heat up
Rising fuel prices could see supermarkets trying to woo shoppers with bigger petrol discounts, an analyst predicts.
Petrol prices edged up 2 cents per litre last week to $2.21 per litre of 91 octane petrol, only 6c off the all-time high of $2.27 set in July, but still well short of the inflation-adjusted record of $2.46 per litre in 1981. The price rise came on the back of an increase in the cost of Brent crude oil from US$108 to US$115 a barrel between June 6 and June 19 as concerns mounted about conflict in Iraq.
Automobile Association senior policy analyst Mark Stockdale said if prices at the pump continued to increase, supermarkets could see an opportunity to attract customers with big discounts.
Countdown, owned by Progressive Enterprises, offers fuel vouchers through Z and Gull petrol stations, while Foodstuffs’ Pak ‘n’ Save and New World run the FuelUp scheme through Mobil and Pak ‘n’ Save’s on-site fuel stations. The AA has its own fuel discount scheme, the AA Smartfuel card, which can be used at BP or Caltex stations.
Discounts typically start at about 4c per litre for shoppers who spend more than $40 but on some occasions discounts of as much as 40c per litre have been offered for supermarket purchases over $200. And Stockdale said these sorts of special offers could become more common if motorists felt the pain of a sudden petrol price rise.
“From the supermarket’s point of view, when prices are . . . close to record highs, motorists are more sensitive and more open to taking advantage of supermarket programmes. It’s a good strategy for supermarkets. They can entice people in and they know they’ll want to buy enough to get over the purchase threshold.”
Retail analyst Tim Morris of Coriolis Research said people got used to high petrol prices over time but sharp increases caused “sticker shock”.
He said offering fuel vouchers was a “zero sum game” for the two supermarket companies, but neither one would stop doing it while the other one continued.
“If duopoly member A does it and duopoly member B does it then there’s no advantage. Wherever I go to shop I’m going to get one of those things,” he said. “If you get 4c off a litre you might save $3, which is better than nothing, but you wouldn’t go to a supermarket over it. The difference in pricing between New World and Pak ‘n’ Save on your grocery bill might be $20.”
Morris said it was also common for petrol stations to offer fuel discounts to shoppers who spent money in-store, usually on high-margin products such as chocolate bars.